Chapter 1 BMGT220 Accounting I NOTES makes inputs to turn into outputs for customers Business Inputs basic resources used to make outputs Outputs goods services business objective is to take inputs turn them into outputs to gain PROFIT provides services rather than products ex Jet Blue merchandising business 3 types of business service business airlines transportation service HBO television service customers ex Walmart Amazon customers ex Ford Motor Company Dell Computers manufacturing business changes basic inputs into products sold to sells product bought from other businesses to Accounting used by managers to operate business and by others to assess Accounting economic performance of business economic activities and condition of a business an information system that provides reports to users about the Accounting the language of business b c it s how businesses financial information is communicated to users How accounting provides info to users Identify users 1 2 Assess users information needs 3 Design the accounting information system to meet user s needs 4 Record economic data about business activities and events 5 Prepare accounting reports for users 2 types of users INTERNAL EXTERNAL internal users involved in managing and operating business external users and government of accounting information managers employees directly of accounting information investors creditors customers Managerial accounting area of accounting that provides internal users with information objective provide relevant and timely information for managers employees decision making needs Sometimes sensitive information info intended to be kept inside business ex information about customers prices plans to expand etc and estimated data in providing information that management uses in conducting daily operations in planning future operations and in developing overall business strategies the branch of accounting that uses both historical Managerial accounting LINK MANAGERIAL ACCOUNTING W INTERNAL USERS LINK FINANCIAL ACCOUNTING W EXTERNAL USERS Managerial accountants are employed by a business in PRIVATE Private accounting the field of accounting whereby accountants are ACCOUNTING employed by a business firm or a not for profit organization Financial accounting provides external users with information the branch of accounting that s concerned with Financial accounting recording transactions using generally accepted accounting principles GAAP for a business or other economic unit and with a periodic preparation of various statements from such records Objective of financial accounting is to provide relevant and timely 1 type of financial accounting General purpose financial statements information for decision making needs of users OUTSIDE of the business ex financial reports for banks on whether or not to lend report that s distributed to external users They serve to a wide range of decision making needs Ethics moral principles that guide the conduct of individuals Role w accounting frauds ex Enron Health South Xerox Bernie Madoff Ethical conduct individual character firm culture Sarbanes Oxley Act of 2002 SOX established a new oversight body for the accounting profession called Public Company Accounting Oversight Board PCAOB SOX also established standards for independence corporate responsibility and disclosure Auditors verify accuracy of financial records accounts systems Public accounting the field of accounting where accountants and their staff provide services on a fee basis Can be independent or apart of a firm Certified Public Accountants CPA s meet state s education experience and exam requirements generally accepted accounting principles GAAP are used in preparing financial reports these reports used to compare companies The Financial Accounting Standards Board FASB has primary responsibility for developing accounting principles The SEC Securities Exchange Commission has authority over accounting and financial disclosures of publically traded companies Outside USA International Accounting Standards Board IASB There ARE differences between FASB IASB Business entity concept a concept of accounting that limits the economic data in the accounting system to data directly related to the activities of the business business SEPARATE from owners creditors or other businesses Ex accountant records business activities not personal activities of owner Forms of businesses proprietorship owned by 1 individual partnership 2 or more owners corporation organized under state federal statues as a separate legal taxable entity limited liability corporation LLC combined the attributes of a partnership corporation cost concept their cost or purchase price objectivity concept recorded in the accounting records to be based on objective evidence buyer seller negotiate price only FINAL price recorded unit of measure concept be recorded in dollars assets amounts are initially recorded in the accounting records at concept of accounting requiring economic data to concept of accounting that requires the amounts Business transaction the resources owned by a business Rights claims to assets THE ACCOUNTING EQUATION assets liabilities stockholder s 1 Rights of creditors debts of the business LIABILITIES 2 Rights of owners stockholder s equity stockholder s equity for corporation owner s equity for proprietorship partnernship LLC equity Liabilities shown before stockholder equity because creditor s have first rights to assets an entity s financial condition or it s results of operations ALL the accounting equation capital stock by investor s owners in exchange for shares of stock account payable prepaid expenses the future assets supplies liabilities accounts payable revenue products to customers fees earned sales sales and sales on account rent revenue interest revenue account receivable services on credit expenses revenue dividends distributions of a corporation s earnings to stockholders the liability created by a purchase on account revenue from providing services received for interest received for rent increases in stockholder s equity as a result of selling services or total amount charged customers for merchandize sold including cash assets used up or services consumed in the process of generating business transactions can be stated in terms of changes of elements in the portion of a corporation s stockholder s equity contributed items such as supplies that will be used in the business in a claim against the customer by
View Full Document
Unlocking...